IRS to Test Its Own Free E-Filing Program in 2024

The United States Internal Revenue Service (IRS) has spent the last several months working on what many Americans have long considered a pipe dream: a free e-filing program built and operated by the federal government. The program is expected to compete directly with private software, which taxpayers have increasingly found confusing or expensive.

According to three IRS officials (at least one of whom no longer works at the agency) who spoke with The Washington Post, the prototype facilitates free digital tax filing for taxpayers nationwide. With approximately 90% of individual tax returns being filed digitally, the IRS appears to have recognized the importance of offering software that works directly with the government people are paying. The IRS will test the software with a small group of taxpayers beginning in January 2024, when 2023 taxes are eligible for filing. 

Many Americans are fed up with private tax software’s misleading advertising and steep costs. For example, private options are often advertised as free but charge users partway through—especially when they begin the state filing process. Individual Americans spend anywhere from $40 to $150 each time they file their taxes, for $3.5 billion to $13 billion annually.

Credit: Stevepb/Wikimedia Commons

Other taxpayers dislike private options because they aren’t pulling tax data directly from the government. Unlike countries such as Denmark, Spain, and the United Kingdom, which send taxpayers definitive tax liability forms rather than making citizens send their own returns, the US requires taxpayers to take on all tax filing responsibilities. Using a service that connects directly with the government—instead of sending information back and forth as private software does—could reduce the potential for errors. 

“There’s something very important about the fact that even beyond making it easy and beyond making it free, this is something you could do directly with your government,” a representative for Code for America told The Washington Post.

The private tax-filing industry is less than thrilled about the prospect of an IRS-run option. “A direct-to-IRS e-file system is wholly redundant and is nothing more than a solution in search of a problem,” Intuit spokesperson Rick Heineman told NPR. “That solution will unnecessarily cost taxpayers billions of dollars and especially harm the most vulnerable Americans.”

The IRS developed its forthcoming software with the US Digital Service, the White House’s information technology consulting division. The project was funded using $15 million from the Inflation Reduction Act, which required the IRS to look into building its own direct filing service.